Question:
I want to buy a new car. Should I sell my existing car privately, deposit the cash in a savings account and get the new car on residual with no deposit, or should I trade my existing car (2000 Polo) for the new one at the dealer?
Answer:
The general rule is that if you sell your car privately you will make more money out of it than if you sold it to a dealer. If you took the money and invested it in a savings account you might get a nine percent return. If you then took out a residual lease your interest rate would be about 16 percent. The interest you gain from your savings would effectively be wiped out by the lease costs. Also a residual lease is a very expensive option because you defer the payment of capital but still pay the interest.
So your best bet would be to sell your car privately, find a car you like, negotiate the best price possible and put the cash down as a deposit on a regular lease or instalment sale.
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